BaFin Requires Coinbase Germany to Tackle Organizational Deficiencies

Germany's financial watchdog ordered cryptocurrency exchange Coinbase's local unit to ensure it has effective risk management and internal controls in place after uncovering "organizational deficiencies" during an audit of the firm's financial statements.

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The Federal Financial Supervisory Authority, known as BaFin, said Coinbase Germany was in violation of standards set by the German Banking Act. The announcement referenced Section 25a (1) of the Act, which lays out requirements for firms to maintain risk-bearing capacity, adequate staffing, emergency management mechanisms such as IT systems and transparent remuneration systems for employees – including management.

The requirements also include setting up "appropriate arrangements that allow the institution's financial position to be determined at all times with reasonable accuracy."

"An audit of the annual financial statements revealed organizational deficiencies at the institute. The regularity of the business organization was not given in all audited areas," BaFin said in its statement.

Coinbase Germany received permission from BaFin to provide crypto custody services in the country last year.

In addition to internal controls, BaFin found Coinbase Germany lacking "appropriate and effective risk management" for when transactions or services that are typically conducted by the firm are outsourced to other parties.

"We have developed a remediation plan fully addressing each finding of the audit report to address BaFin's concerns. To date, we have made substantial progress on this plan,"Coinbase said.

Source: CoinDesk